The London problem: has the capital become too dominant?

The referendum on Scottish independence is, at heart, not a vote about Scotland. It’s a vote about London. The choice facing Scots is whether they trust each other enough to sever the umbilical cord: London largesse, London-based decision-making, London hegemony. London divides the UK in a way that no other country in Europe is divided.

Indeed, London is a divided city in its own right: it is home to the greatest concentration of poverty in western Europe. At least two of its boroughs – Hackney and Tower Hamlets – are among the ten most deprived in England. And yet politicians such as Greg Clark, the minister for universities, science and cities, tell us that Londoners are 69 per cent more productive, in GDP generated per head, than citizens elsewhere in the UK.

It is worth dwelling on Clark’s figures (below), both for what they reveal and for what they hide. Clark used the figure of 69 per cent to try to demonstrate that London was not so different from other capital cities in terms of economic dominance. But he did not take into account the size of London’s population relative to the rest of the UK. London is small compared to, say, Seoul, or Tokyo; consequently its economic dominance is even more pronounced.

The only city that takes a greater share of national product than London is Moscow. Paris takes a large but slightly lower proportion and so, for well over half a century, the French have referred to “Paris et le désert français”. The English talk about their own division simply, and less dramatically, as the problem of “the north”. A plan is needed for the north, we are often told; but that is impossible if there is no plan for London.

There is nothing inevitable about living with high rates of national inequality. We are not in some imaginary global race where everywhere is becoming similarly unequal. At the lower end of Clark’s list is Vienna, whose citizens were apparently only 30 per cent more productive than the average Austrian; even more equitable is Stockholm, at 23 per cent; and Tokyo and Seoul, each with a rate below 15 per cent. Of course, almost all that extra London money flows into the pockets of the richest residents. The median Londoner is not much better off than the average citizen of the UK.

What exercises many Scots right now is that the rich Londoners they hear most from appear to believe that there is no alternative to these inequalities and that the rest of the UK may even benefit from the trickle-down of some of the wealth of an ever richer capital. Growing inequalities undermine the case that Scotland is “better together” with London and the idea that Scots might moderate the arrogance of London’s elite should they remain in the Union with England.

It is taking a long time for the English chatter to turn towards the realisation that the Scottish vote is a judgement on London – and on the desirability of being linked so closely to what can appear to be a selfish, often stupid and always dominating force. It is hard to think of a scenario that would shake London from its trajectory of growing inequality and drift towards being a tax haven for the world’s super-rich.

Of all the scenarios I can imagine, and each is unlikely to occur, it is Scotland voting Yes to independence that might most obviously dent the English capital’s prestige. How will Londoners explain why, if being attached in some way to London is so beneficial, the Scots chose to leave? What other event, more than such a rejection, would encourage the introspection needed among the English about where they are heading?

Other scenarios are easy to imagine but are more unpredictable in outcome, and not necessarily desirable in the short term. A run on sterling is seldom mentioned today, but sterling is a weak currency backed up by an indebted set of one small and three very small nations. A second banking crisis is far from impossible and would hurt London more than anywhere else on the planet. Or think of climate change bringing persistent rain, followed by the flood waters of the Thames meeting a particularly high spring tide coupled with a storm surge. You can begin to imagine some of the scenarios that the cabinet’s emergency Cobra committee might find a little tricky to deal with.

So what would a serious “London plan” be? What could offer a more sustainable future for the English capital and English regions, irrespective of the choice being made north of the border in September?

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Technically, a London plan already exists in the form of the Mayor of London’s Spatial Development Strategy. In many ways this is a laughable document; though mostly tedious, it serves to demonstrate that there is no plan. To save you the trouble of searching for the best jokes it’s worth knowing that paragraph 3.22 of the latest version (October 2013) states, on provision of housing, that: “The probability-based approach adopted in London to address this has already been tested and found to be robust.”

In truth, there hasn’t been a proper London plan for some time. The Centre for Research on Socio-Cultural Change (CRESC) studied regional trends in the UK under New Labour and came to the conclusion that London stood out in stark contrast: “There was no autonomous private-sector job creation in decaying regions like the North-East or West Midlands during this period; and precious little full-time job growth anywhere outside London. Between 1997 and 2010, London on its own accounted for 43 per cent of all extra full-time jobs created in the UK, and London is now the only region of the UK capable of creating new full-time private jobs. And, again frighteningly, there is no movement of surplus population from the periphery to the centre.”

The CRESC researchers explained that London grows through immigration from the rest of Europe. It does not soak up surplus labour from the rest of the UK but, instead, sees more people leave it to settle in the rest of the UK than those who come in. And it is not just for jobs that people are coming to London. It is now thought that in a good year for overseas recruitment London universities may admit more students from outside the UK than from places in the UK outside London. The more frequently people move across borders and the longer the distances they travel, the less closely tied the capital becomes to the rest of Britain.

By early this year, the trends identified by CRESC had become embedded with the help of the coalition government after the 2008 crash. The Centre for Cities reported that London had accounted for 80 per cent of private-sector job growth between 2010 and 2012. That was ten times more than for the second-fastest-growing city in that period, the UK’s second city of finance: Edinburgh. Whereas there had been public-sector job cuts in most cities, the national government was increasing the number of state-funded jobs in London by 66,300. By contrast, Edinburgh lost more than 3,000 jobs of this type over the same period.

The north-south divide widened more rapidly after 2010 and started to become a stable feature of many British maps. This is evident from the geographical patterns seen with so many trends, from the rise in shoplifting (see Figures 2 and 3 below) through to the proportion of people who had bought a home for the first time in 2007 and who were still in negative equity seven years later. In the early 1990s, negative equity was worse in London, not in the north.

As London moves away from the rest of Britain economically, other areas begin to drop off the map. Scotland is often missing from the most recent maps used by social scientists, because data is no longer collected in the same way there.

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What can be done about London’s economic dominance? The first thing might be to accept a few truths. The second is to act on that understanding. The third is to speculate on what might happen if we don’t act.

What happens when one does not plan? It is worth looking at the more laissez-faire attitude in some US cities. Look at the low-density sprawl and absolute car dependency of Los Angeles and the power blackouts of California. Look at poorly planned megacities in poorer parts of the world to see how bad crowding on pavements can become and how long a commute can get, and look to all the worst-planned cities for where ordinary people pay the most simply for the right to live and work in the city.

The truths we must accept in order to avoid this future are not unpleasant, but certainly many of us do not want to accept them. London is growing and poised to grow quickly. It is Europe’s only megacity, though in less than a century it has dropped in rank from the largest city in the world by population to 25th largest. Its nearest competitors for megacity status, Cairo, Istanbul and Moscow, lie on the edge of Europe and are not getting that much closer politically or demographically.

It is not so much the success of London’s financial industry that is causing its wealth and influence to grow as the curiosity and aspiration of a huge number of mostly young adults from around the world. These youngsters have set their heart on living and working in London, at least for a few years. Forty years ago it was the Irish, Welsh and above all the Scots who came to live in London in unusually high numbers.

From Danes or Frenchmen who believe their country is holding back their entrepreneurial zeal, through to the nouveaux riches of China and India looking for a luxury second home, and even refugees without papers who need somewhere to work for a pittance but have a chance, London is attractive to millions. London speaks the world’s second language and the first language of the internet. No matter who you are, you won’t stand out as odd in London. It has surpassed even New York and Singapore as the favour­ite global bolt-hole of the super-rich.

London will grow; the only question is by how much, and how well-planned that growth will be. Government rhetoric suggests that nationally we will soon be building 200,000 homes a year but will have zero net migration. Given recent trends, both claims insult the voters’ intelligence. Nor, together, are they tenable. There is one good reason to build houses and it is for the immigrants we should expect to come, those who have been coming for many years now and whose numbers were boosted by the financial crash. If emigration were greater than immigration in future years there would be very little need to build new houses. Soon, given the age structure, many more people will die each year than will be born in England, even if fertility rates do not fall further as they have done across the rest of Europe. Simply refurbishing the old stock would result in enough homes for all of “Generation Rent”. And so many would not have to rent if they did not allow their elected politicians to help landlords evade so much tax, and make it desirable to be a private landlord. England has enough homes for everyone living here but not enough to cover those whose likely arrival we should plan for.

The last time the UK had a recession and net inward migration was in the 1930s, an effect of the 1929 crash. It was then that we built many of London’s suburbs. Partly we built them as fewer people emigrated from England: there were fewer opportunities abroad during the Great Depression. We built them also because migration from even more depressed Scotland, Ireland and Wales, as well as immigration from further afield, was increasing demand. Today is similar, except people are travelling from further within Europe. Policymakers in the European Commission refer to this internal movement of people as “mobility” across the EU rather than migration, but it will be some time before such language from across the Channel permeates our thinking.

Without immigration, there is no sensible reason to build new homes rather than renovate old ones – unless we want to see our existing housing stock shared out even more unfairly. We need “Pocket homes” for singles and couples without children. We need to time our building of homes in London to fit in with expansion of public transport and cycle routes. We need to encourage the value put on walking so as not to increase our levels of air pollution, already the highest recorded in western Europe. (Some argue that levels are higher in central Paris.) But all this would require a decent plan. The free market does not co-ordinate spatially and temporally; it reacts rather than instigates.

Acting on the understanding that London is going to grow requires recognising where London’s real boundaries lie. Oxford and Cambridge are de facto outlying suburbs of the capital. Oxford’s soon-to-be-opened second mainline rail station will be just over an hour’s commute from central London. If we do not provide better housing closer to the centre of the capital, the effects will be felt a very long way out. London relies on far too much long-distance commuting, to the detriment of many people’s lives.

We must build high-density, high-quality housing that is affordable. The smoke and mirrors of those with a vested interest in house-price inflation and high rents makes this sound impossible. Given that so many people are willing to pay so much to live in London, couldn’t they all be housed there a little more cheaply, yet still have the actual costs of providing that housing more than adequately covered? They could – but not at rates of return that would allow the richest 1 per cent to carry on getting richer as quickly as they do now. London needs both rent regulation and enhanced housebuilding.

But where are we to build? Our greenbelts were designated at a time when we did not understand the extent of the floodplain. Existing greenbelt land needs to be swapped, acre for acre, for land that really should never be built on; land where we should expect more floods as rainfall becomes more erratic. We should protect ecologically valuable land that is under threat. All that should become true greenbelt, not uninspiring farmland. As London expands, it should build not only upwards, but also on some of the higher land on the edges – but only where there is an environmental argument to do so; and not in small, car-dependent towns further away from the centre of London.

At present, the policies set out by the coalition government’s “Ecosystem Markets Task Force” allow builders to offset the destruction of Sites of Special Scientific Interest by, for instance, planting a new oak wood if they build over an ancient one. This has to be stopped. Greenbelts don’t prevent urban sprawl; the sprawl just hops over them, increasing commuting times outside them and house prices inside. Good-quality, high-density living prevents sprawl.

Much of the building that will be needed for the new migrants who will come (and help reduce our national debt) should be within the present boundary of Greater London. Many people argue that there is little justification for giving planning permission for new buildings within London with fewer than five storeys. At these densities, enough people arrive to sustain local street life. Cafés and local shops are found across Barcelona, a city that is four times as dense as London in its heart. But London also needs wider pavements, more cycle lanes, more one-way streets with just a single lane for cars, and far fewer lorries and taxis trying to squeeze through its streets.

Far more imaginative policies than better traffic control can be thought up to make the capital more liveable. There is no need to try to pack every last national institution into London. Why not move parliament somewhere more affordable, to a place where MPs won’t need huge housing allowances to be able to live and work while distancing their lives from those of their constituents? But if parliament were to be relocated outside London, where would that be?

One obvious answer is the first stop from London on High Speed 2, Birmingham. Members of the House of Lords, such as Norman Tebbit, who complain that they couldn’t live anywhere near their workplace could easily find a home in Coventry, or nearby Sparkhill, with perhaps more homes built on brownfield sites there, relieving the pressure on London. The old buildings in the capital could be kept for ceremonial occasions and as tourist attractions, but there is no need to require our elected representatives to battle their way through to the neighbourhoods least representative of the lives of almost all of their constituents.

There is much else in London that does not need to be there. Much can move out to make way for the almost inevitable influx. (It is worth remembering here that there are at least two possibilities that would make that influx not inevitable. The first would be Britain leaving the EU and revoking the free movement of labour. The second would be an economic crash in London that was not part of a worldwide financial meltdown – due to a generally unforeseen run on sterling that required sharp hikes in interest rates. The effects of either would be similar.)

Finally, what might make for a better-planned future? We seldom consider the most liveable megacity in the world, the one with the lowest crime rate and highest life expectancies: Tokyo. What helped Tokyo become what it is today? Very equitable income distribution certainly helps, but that was not all. It was after the great property crash of 1992-93 that Tokyo’s planners were able to say, with some force, that following the money and doing what the market suggested did not result in the best overall outcome. Satisfying the wishes of innumerable pairs of buyers and sellers never results in an equilibrium. Only someone as mathematically unimaginative as an orthodox economist could believe that.

The great London residential property-value crash may be years away, but what is our plan for its aftermath, if indeed it happens? A Japanese colleague sent me data showing how the average price of residential land in Tokyo more than doubled in value in the year to 1987, stayed very high until 1990, but then fell back to 1986 prices by 1996 and has remained low ever since (see Figure 4, below). Life as they knew it did not end in Japan when the value of land in Tokyo plummeted. The following two decades weren’t actually “lost”. It just became easier and cheaper to live, and far more obviously necessary to plan.

Without a plan, life in cities becomes chaotic, prices surge, congestion rises and dissent grows to the point where parts of the state begin to calculate that it is in their interest to leave. Not planning for London to grow in a world that is ever more urbanised is planning to preserve a living museum, one with aspects of Dickensian-level inequality. Planning to allow almost anything the markets and overseas investors desire is planning for a Blade Runner-style future.

Between these two extremes lie many other possibilities. But if you were living in Scotland now would you trust the English elite to have the sense to consider them?